Rejection of account books at survey, with non-production supporting an adverse inference under the U.P. Sales Tax Act

Non-production of account books at the time of survey can justify rejection of the books where the assessee is expected to keep true and correct accounts available for inspection. Reading the obligation to maintain proper books under section 12 with the inspection and search powers under section 13 of the U.P. Sales Tax Act, the court treated failure to produce the books during survey as a relevant circumstance for doubting the correctness and completeness of the return. The assessee also had to explain the non-production, and prior rejection of the same books in earlier years reinforced the adverse inference. The books were therefore rejected in the circumstances of the case.

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Issues: Whether account books maintained by an assessee under section 12(2) of the U.P. Sales Tax Act can be rejected merely because they were not produced at the time of survey.

Analysis: The non-production of books of account during survey was treated as a relevant circumstance for assessing the correctness and completeness of the return. The maintenance of true and correct accounts under section 12 and the powers of inspection and search under section 13 were read together to hold that books kept at the place of business are expected to be available for inspection. Failure to produce them at survey could justify an adverse inference, and the assessee had the burden to explain such non-production. In the facts noted, the books had also already been rejected in earlier years without challenge, supporting rejection for the years in question.

Conclusion: Yes. The books of account could be rejected in the circumstances of the case, and the issue was answered in favour of the department and against the assessee.

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